Rolls-Royce reduces shareholder payments

Rolls-Royce reduced shareholder payments for the first time in almost 25 years and said it will need to deepen cuts amid sluggish sales of marine turbines and slumping demand for older wide-body jets.

The engine-maker’s full-year dividend will fall to 16.4 pence from 23.1 pence for 2014, London-based Rolls-Royce said on Friday.

The company maintained its outlook, after six profit warnings in two years. Underlying profit for last year fell 12 per cent at constant exchange rates to £1.43 billion ($2.07 billion), while sales fell 1 per cent to £13.4 billion.

The first cut to Rolls-Royce’s annual dividend since 1992 helps Rolls-Royce preserve cash and protect its credit rating.

Restructuring charges this year may reach £100 million, chief executive officer Warren East said, adding that "further reductions" will be necessary after already lopping 20 per cent off the top two tiers of management.

The reduced payout places the engineer alongside UK companies including grocers Tesco and J Sainsbury and platinum-miner Anglo American that have slashed dividends.

“Despite steady market conditions for most of our businesses it will be a challenging year as we start to transition products and sustain investment in civil aerospace and tackle weak offshore markets in Marine,” East said in the release.

Rolls-Royce has been plunged into crisis as the tumbling oil price undermines sales of engines it makes for specialist offshore vessels just as demand for corporate and regional jets slumps and some of the bigger planes it powers reach retirement age.

Rolls-Royce’s pretax profit for 2015 was within a range of £1.325 billion to £1.475 billion forecast in November.

Analysts had predicated earnings of £1.27 billion, the average of 25 estimates compiled by Bloomberg.

Rolls’s share price has fallen 7.8 per cent this year and 39 per cent since East took over in July, reducing the company’s market value to £9.75 billion.